Nigeria Market is quite Dynamic – A. K. Mirchandani, Chairman of Sona Group
Mr. A.K. Mirchandani is the Chairman of Sona Group, one of Nigeria’s fastest growing Groups. The Group is presently in the business of manufacturing Plastic and Glass Container. It started business in Nigeria decades ago. The Group’s strategy has been to acquire existing ailing units and turn them around. After the unit is acquired, it brings in new investments, modern technology, state-of-art machines and modern management techniques that help to turn the business perspective.
Over the years Sona Group has earned a reputation of ‘Turn around Experts’ in Nigeria. It has a consistent business growth in all the units it acquired and they are performing remarkably well.
Sona Group, Nigeria provides distinct and world class services via each of its ten subsidiaries which include Shongai Packaging, Euro Global, amongst other.
Under Mirchandani ‘s leadership the subsidiaries have been built into vibrant and prospering brands which has made the group to be living up to its claim of being the Pride of Nigeria… with a record of operating with…global excellence and guaranteeing …local upliftment. In an exclusive interview with MARKETING EDGE’s JOSEPH EKENG and TAIWO OSHO the industrial giant spoke on his Group (of Companies) and the Nigerian market. Excerpts:
What keeps you going, what is your driving force?
Well, my primary objective in life is rooted in what God has said that if you do good, it will come back to you; as such my motivation is to try very hard to see if I can create more jobs, I can help people and invariably, they will be proud of themselves, that, to me is key. You know, it makes you happy when you see other people happy, if I give a smile to someone, it comes back. It is so because it is the law of nature. You may not find it in monetary or other terms but you will find that inner happiness and the inner peace that you will get out of it. Think philosophically, why did God create nature? Why do we look at and admire nature? It is because nature gives us everything, we get everything from nature; and you can’t survive without sun rays, you can’t survive without mother earth, mother earth feeds us and endures all the problems, you do whatever it is but she still takes it because mother is the mother, mother knows all of us.
What is your feeling about the MARKETING EDGE Awards, what does it mean to you and your company?
It is not all the time that you get such awards and when we get an award like that, it makes us feel good because it encourages us to say oh, someone has come up and feel that we could do something and we are doing something and yet, we can do better and that encourages us the more, sincerely, I think that this award is one of the good experience and it has really helped us to resolve to grow stronger.
You have been here for some decades now. What is your experience about the Nigerian market compared with other markets?
The Nigerian market is a dynamic market, Nigerians in themselves are very dynamic and hard working people, and they are great people, too. Many countries you go, they say Nigerians are very aggressive, if you go to some other neighboring countries, they will say oh, they are laid back people, Nigeria opens up the avenue for people to go to South Africa and since they went there, they have been very successful; you find Nigerians in US, UK, Europe, everywhere. I was in Switzerland and I found out that my taxi driver was a Nigerian, so immediately I saw his name, I said ‘Kedu’, he was shocked, he wouldn’t believe me, he said where are you from, I said, I am from Nigeria, he said but you don’t look like a Nigerian. I said my skin does not give you that feeling, don’t worry about the feeling, but I am a Nigerian. Yes, Nigerians are really successful people; they are very enterprising and so is the market, a dynamic market, and the market is good, it is a place where the people work very hard. My experience in Nigeria has been very good. A lot of people run away, they think about Nigeria as something else, yes, you will have all sorts of people in every community, we have the good, we have the bad but the Nigerian market is good.
Could you tell us your journey so far – from India to Nigeria. I mean your journey into business in Nigeria, Ghana, United States etc? How did this journey bring you to this point where you are right now?
I started my life in Africa. When I finished my education, I traveled down, that was the first time I landed in Africa and that was in Ghana and the year was 1960. Obviously, you get used to a place and you start thinking about the place and if you have the motive to succeed, you will learn to be part of the culture, then you become a part of it; you will always feel the passion as it comes, because you need to have the passion to feel at home, if you don’t have that feeling, you will not succeed, it is important to feel that you are part of it.
How did your journey to Ghana bring you to Nigeria, could you just tell us the history?
Ghana had their independence just about that time, 1957 and they were on their own. Due to whatever leadership at that time, Africa was just gaining freedom, they were following India, they were following Mahatma Gandhi and I could see that the trend was, everyone wanted to be free and nobody wanted to be a slave anymore; that was the trend created by our leader, our father which was Mahatma Gandhi starting with South Africa as you know and he went on and then that motivated every African country and every Africa country felt, if India could manage with 1.2 billion people, if India could do a lot, there is no reason why African countries could not survive. That was how African countries were motivated by India. Nowadays when leaders take over, obviously you will find out that it is not the same thing and the same way again. The previous leaders or governments were well organized and so on.
So you feel that whatever reserves are there, the reserves are gone so, they will find out that they didn’t manage the reserves well, now we are short of money and we have to go to circles of diversification and the diversification from trading or import becomes an endless realization. What happens is that investors and traders will feel that there is a shortage of XYZ, goods and you immediately say ok, now that I cannot import, I have to find something else that will probably help all of us, we can employ some people, it could be on a long term, it could be a long journey but that can be the future of everyone including the nation and people can be trained, people can go about getting whatever they want to get and the industry will survive. but then, no country will survive without motivation, to industrialize, to be self sufficient, to be on their own feet, the moment you are not on your feet, you are still a slave, you cannot continue to remain and feel oh, I am free, free in what, in mind, free in mind is not only a necessity but also free in action in terms of yes, you want to build an industry, you want to survive, you want to make sure that you don’t rely on import alone, that is part of the components that will come in because all the industries cannot be developed in a day, because it is a process and a long term commitment. It is government policies that must help everyone to grow. The industry will grow as long as you have the population, so there is no reason to think that you cannot grow, you only need to motivate yourself.
As you saw the needs in Africa, you came in, is that it?
Yes. As I said, it was the hardship, all of a sudden, we realized that there was no foreign exchange and the government said that we have to go to the industry, we have to self manage and of course the market demands, you don’t have XYZ, you don’t have other things and so on, so people say there is opportunity here, let me put up an industry and by putting up such an industry maybe I can serve some people and of course in turn, I will employ some people, I will bring the technology, I will invest the money, this is normal. So, in 1965 I immediately branched into industry realizing the fact that they were handicap in import, people could not just import, buy and sell, and I realized and it made sense for us to see what we can manufacture locally and because we don’t have any imported goods, people were resolved to buy local goods, so slowly you keep on improving the quality, you keep on developing backward integration, so that is how the growth comes.
At what point in your entrepreneurial journey do you think that Nigeria was the next place to go to?
What was happening then was that, there were a lot of Nigerians in other West African countries, there were lots of Nigerians in Ghana, Cameroon, Sierra Leone, Abidjan and so the neighboring countries used to come and buy and then go. I realized that Nigerians were very enterprising, so when we were short of raw materials, we said what do we do, where can we get raw materials, some of our partners then said they could get the materials from Nigeria and we could pay them in local currencies, no foreign exchange problem; they were doing that, and we said these are our materials that we need, you bring it from Nigeria or anywhere, as long as you deliver it, we will buy it locally and we will manufacture it and that was how the business started, and that how I came to know about Nigeria. That was how I came to know that Nigeria is very resourceful.
We really studied the market again to know what Nigeria could offer us; incidentally, Nigeria was also importing at that time, they were totally relying on imports; they were not having many industries at that time. It was only after the Biafra war started when the government restricted a lot of items and they said that they could not import because there was no money, there was no foreign exchange, all the resources were geared towards trying to restore peace which cost a lot of money; the government was very strict about import and it became a problem.
What happened in Ghana was exactly the same thing happening in Nigeria; they were importing textile, they were importing Champaigne, it was one of the best country for Champaigne, I will say four, five years before then, Nigeria was great at importing Champaigne, it was number two in the world. But all that changed with the outbreak of the war because there was restriction and all that and this was the right thing to do.
Nigeria gradually started to industrialize and I knew a lot of Nigerians way back then who were coming to Ghana to look at our industries and use it to do government business.
Now, in the course of buying materials from Nigeria, we realized that the country was becoming an industrialized nation, so we said that we would start to manufacture some of our fabrics here, we would also manufacture some of our other products here. That was how we went into textile manufacturing, because we realized that the population requires clothes and other basic necessities of life.
So backward integration was your main drive for your expansion in the African market?
That is what happens normally. When you are starting an industry and there is something else that you require and you are not relying on other manufacturers because they may not be able to give you the quality and you still want to maintain such standards and qualities and you say, if I am not getting it, I might as well be able to put up an industry to produce such things and what may cost me much will actually come cheaper and if it is cheaper, I think the market can expand. It is much reliable on your own as long as you can afford the investment. You say to yourself, I don’t have to buy it from XYZ and pay 15 or 20 percent more. Once you do it locally, it opens up other avenues and you begin to realize, I have done this, I am short of this, maybe I can do this. So depending on the market demand, you will begin to generate more and more and diversifying into other businesses that are all related. If you look at it, it is inter-connected. You want to be interconnected with yourself.
That is why you have expanded from one company to nine companies?
Yes. It is necessary; you have to manage so many things by yourself. In Nigeria today, you don’t have regular power supply and you actually have to put up a power plant to connect, all of a sudden, you find out that you don’t have water, too because the water supply is not adequate, so you need to do your own borehole, then from water, you need to do re-processing of the water to make sure that it is clean, etc, all of which you have to find solutions to for you to solidify your businesses.
We realized that power was very short, we realized that without power, the industry cannot run, so we felt it is better for us to go for independent power so that we can supply to our units and if we have excess capacity, we can supply to other industries.
In any case, we also thought about the environment. it is very necessary for us to think about the environment because people’s health is very vital, if you don’t have a healthy labour force, you cannot perform. Therefore, we look at the environment, we look at the quality, the standards and it is necessary for all of us to be mindful of that subject. So we felt yes, we produce electricity, but is has to be based on natural gas, the natural gas which again is a local resource. Believe me, if you concentrate on a local based industry, you will find yourself in a comfortable position.
You have businesses all over the world, why do you prefer Nigeria?
I think that you can be in any country; every country has its own challenges and Nigeria, as I said, I started my life in Africa, so I have a passion for Africa that will never change. It is not possible for us to change our attitude towards Africa. Africa requires lot of support, Africa must grow, people must find themselves in a better position, so they can grow, so I feel Nigeria has a lot of requirements, if I can contribute to the growth of this country, I like to do it. I am happy, I like the weather, I like the people because they are very jovial, nothing is wrong with the people, I feel at home in Nigeria. I love Nigeria.
When the economy is going through a downturn like it is in Nigeria presently, the FMCG brands suffer the most. How is the downturn affecting you as a major player in the FMCG?
I can tell you one thing, today is not the first time that Nigeria is going through this. I can give you the history way back up to Biafra war, how they industrialized and then of course, came oil and people forgot all the difficulties they had during the Biafra war; memories are short in life, industries started dying because we were changing the course because there was enough money from oil so people thought they didn’t have to work hard again. People’s attitudes change once money comes; it is not something new, and it is like that all over the wold. It’s like, if you can afford it, you can say yes, I can live in a manson, I don’t have to live in an apartment, I don’t have to live in a hut, forgetting that if and when the situation changes, you will live in a hut.
Nigeria has gone through a lot. After the coup, there was a devaluation, second devaluation, third devaluation, Nigeria have had so many changes, like our life, we go through a lot of changes in life, so this is not the first time that Nigeria is going through this, it is not shocking or a surprise to me, it is a learning process in life. If you are afraid of difficulties then you will be unable to progress.
I believe that Nigeria is still very robust and that Nigeria will survive. Oil price will bounce back again. But we must always bear in mind that oil well is not going to remain forever, no circumstances you will find will remain forever in our life time, changes are eminent, changes must take place but changes also teach us how we can face challenges.
Does this inspire you to change your marketing strategy?
You see, you can change marketing, you can change sales, you can change products, all these are possible to do and they change with the times. What is required in the market is that you continue to serve the market with quality products; you must have a conscience for quality products and when the quality products are there, people recognize your value, people recognize your products and they will continue to support that kind of industry. In fact, FMCG is one of the best industries that are not going to be impacted negatively because you need those products on a daily basis. You need soap, clothes, food, and a number of other things. Again, remember that most FMCG companies are agro based and I can confidently say that any industry based on agriculture will grow. You could see how Nigerian governments have now realized that we don’t need rice importation, we have land, people must go and farm and government must show and lead the way. There is a value chain as long as they have land and human resources; there is no reason to import.
What is your brand portfolio?
Well you will find that everywhere, there are different industries, any item you take, there are a number of industries producing it and you will see that some may succeed and some may fall through, so goes for the brands. Now, once your brand succeeds, it requires continuity. We are into a number of industries for many of which we are using 100 percent local raw materials. We buy raw products from our farmers and we process them into finished products. For instance, we process the sorghums; we make malt extract which helps in a number of industries. In fact, some of the industries that we have created, we supply raw materials to other industries; they rely on us, which is a value chain. Our Malt and Malt-Extract are supplied up to such companies as Nestle, Guinness, some biscuits producing companies, etc. We, too, are using it in our biscuit company. Mind you, malt extract is produced from 100 percent local sorghums. It is not imported sugar.
How much have you been able to drive down your cost of production by using local materials?
Cost of production can be reduced, but you need to have good equipment, a good process, and so on. There are a number of areas you look at that cost can be brought down. For instance, if you have a direct power supply, if you have a water source, yes. But if you are relying on so many other people, then it becomes difficult to control; they may not supply to you on time, they may be able to hinder your own production because you are not getting everything the way you need to produce continuously.
You buy ailing companies and turn them around, what is the vision behind this corporate business model?
Ailing companies are the same companies that once upon a time somebody had an idea of and they put it up. But oftentimes, ailing company simply means mismanagement, an ailing company means not taking care, not pushing it, not putting the right technology, and that is a handicap. If you have the right management, the right machinery, and you are willing to work and go for it, there is no ailing industry that cannot survive in any country. It is a matter of how you make it work. You can give me any ailing industry today and we would turn it around in no time. To us, it does not make much difference. But then you must ensure that your technology is adequate to meet up with the market requirement; if the market requirement is not meant, then you may fail as well, no matter what you do.
What inspires you business model?
I think that the education you get in college is only theories. When it comes to the business world, the theories are there yet practicalities, focusing on the business, learning the process make you to be more ripe and more accurate in dealing with problems; so you learn practically on the job if you work hard. Like people say, hard work will never kill you; it will always make you more and more focused because you really need to be focused. Naturally, you will learn and once you learn, it is not difficult because it will become normal for you.
How big is your brand portfolio?
We have a lot of brands, and as I said, we have backward integration in soft drinks, we are on ethanol, which produces hot drinks; we are on malt, but we also utilize malt extracts. We are always looking for something that we can do locally and once the people have a taste of the local and it is successful, they will not even ask for imported goods. We are doing that with our biscuits, we are producing locally, and we are utilizing 100 percent raw materials. We want to make sure that on a long run, whether there is foreign exchange or no foreign exchange, Nigeria must survive and that is our focus. We are interested in securing the future for both the present and coming generations of Nigerians.
Of all these brands, which is your flagship brand?
We have a flagship gin called Sabrina Premium Dry Gin, we have biscuits, and our biscuits company is doing very well; we have Savanna brand of soft drink. If you look at that brand, I will say 98% of it is local.
One interesting fact is that you cannot go wrong as long as you produce quality, people need to consume those items on a daily basis and you cannot go wrong. When you look at the biscuits, biscuits were all imported because there was a lot of money, a lot of foreign exchange available and you know that the taste of a rich man is different, but then taste of a rich man changes when he doesn’t have money again as he has to fall back again, to reality. To me, the reality is local products; if we get used to these local products, and I am sure we are manufacturing quality, you can always replace imported items and then the industry will grow.
Nigeria’s population and economy require that we export our goods to other neighboring countries, instead of them coming in to buy trailer loads of goods and taking them through the borders. I think our industries in Nigeria will be more valuable because our neighboring countries do not have industries; they are relying on imports, so Nigeria will do well if they develop industries, if they put in place industrialized policies which can be better encouraged by the government.
Look at the issue of loans, for example, borrowing cost is too expensive in Nigeria; you have to have parameters to reduce the borrowing costs so that industries can expand. There should be enough money for industries to expand and grow bigger and bigger, the bigger they grow, they better they will be to serve African markets.
Then, how do you source for funds?
We work with Bank of Industry, they are a cheaper source of funding for industries, but they are not giving enough money so we also have some other commercial banks that we obtain loans from. Commercial banks are very expensive; you are looking at 20 percent and its multiple effects. That kills the industry; It does not encourage growth. There are other countries where charges on loans are between 1 percent and 3 percent; that is where you have an opportunity to experience the growth of industries because nobody wants to sell goods at very expensive prices because people have to have money to buy expensive goods. In a country like Nigeria where you have per capital income so low, it is necessary for us to produce quality products as well as sell them at prices which can meet with their pockets.
A few years ago, you traded one of your brewing companies; precisely Sona Breweries to NBL, what motivated that transaction and how has it affected your business?
I think we all must grow, and when you see that there are many avenues that you can do business, you exit from one business to another business, you can have a corporation working with the same companies saying, well because I am producing local raw materials, I can supply you the raw materials, you can exchange your facilities, we can give you some parts of our facilities, but then would you work with us in other areas and you will find that the corporation is there and they normally give us their cooperation. We supply many other things to them and we feel that there should be synergy. Today if I was producing beer or malt, or other drinks from 100 percent local sorghum, I felt that anyone that is expanding into that business, it will help Nigeria in a long term and my motivation is, what is likely to help Nigeria, how do we expand this market? Expanding this market is always good, you will always realize that the population growth is there, and when you have so many young people come in, the requirements are growing, obviously you want to make sure that the market expands, when the market expands, we all feel happy because then the consumption is growth oriented, it is always a good thing to expand the market but provided that it is a sustainable market whereby people can afford and they don’t have to go through lot of difficulties.
Has the transactions been worthwhile?
The transactions are always worthwhile businesses; we have a number of companies that the foreign branches are coming, they cannot be allowed to import into these countries, they still feel they created the market for those brands here; they come to us and say can you produce and we say yes, we will produce and give you your own brand. You bring your quality standards; we like to meet your quality standard. We are producing biscuits for a very big company, I won’t mention the name but we are producing biscuits even those ones that will be exported, so we are open to business with anyone who like to see our portfolio.
We do packaging and we supply to all multi-nationals and today, I can tell you, we are still expanding. You must continue to go through expansion, expansion in terms of technology, latest designs, otherwise you produce products you cannot export. This is why I will always say that the government must look at and support the industries and it will be a great future for Nigeria. Government must put in place policies that will eliminate a number of problems confronting the nation, especially unemployment.
No doubt, Nigeria has a great future. I remember that the other day, I saw on Bloomberg that they were reporting that three countries in the world are going to grow exponentially and they mentioned China, India and Nigeria! These are greatly populated countries and in these countries, population is always growing. Africa countries generally have a lot of population growth. If you look at ECOWAS, for instance, there are almost four hundred and fifty million population, tell me the requirements of four hundred and fifty million people, I am sure you can guess.
Is there any plan to reposition the company in the area of marketing?
We always work with professionals; they have great ideas, they understand how it has to be done, definitely you have to rely on them. As long as you have good products and you get your packaging right, they will do the marketing of such products. Like I said earlier, population growth is always there and I believe that whatever industries that you have today, if you had three times more industries, they will still not be enough, the reason being that innovation is very necessary, you need to have more industries, you need to have more competition whereby consumers will always be happy to have choices; you need to give people choices, they have the liberty, the rights and you must give them those rights, for them to decide what is the right product which they must pay whatever price for – for its value. That is my belief.